M/S SAFE INFRA PROJECTS PVT. LTD., JAIPUR V. INCOME TAX OFFICER, WARD-5-4, JAIPUR

ITA 1293/JPR/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1316 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 19-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Bogus Share capital; Search and seizure; Tangible material; Difference of opinion; Accommodation entries; Bogus loan; Reason to believe; Change of opinion; Reassessment proceedings; Borrowed satisfaction
• Section: 143(3); 143(1); 139(1); 13; 147; 68; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 1293/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2009-10 M/S SAFE INFRA PROJECTS PVT. LTD., A-10, JAI JAWAN-1 ST , TONK ROAD, JAIPUR. CUKE VS. THE ITO, WARD-5(4), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AALCS 7229 K VIHYKFKHZ@ AP PELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SMT. NEENA JEPH (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 14/11/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 06/12/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-2, UDAIPUR DATED 28.09.2018 FOR THE ASSESSME NT YEAR 2009-10 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND S OF APPEAL:- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE VALIDITY OF THE ORDER PASSED BY AO U/S 147 OF THE I T ACT, 1961. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING AN ADDITION OF RS. 1.10 CRORES U/S 68 BY TREATING THE SHARE CAPITAL MONEY RECEIVED FROM THE FOLLOWING PARTIES AS UNEXPL AINED:- ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 2 S.NO. NAME OF THE COMPANY AMOUNT 1. OLIVE OVERSEAS PVT. LTD. (REALGOLD TRADING CO. PVT. LTD.) RS. 10 LACS 2. BLAZER VENTURE PVT. LTD. RS. 15 LACS 3. SEPIA VENTURE PVT. LTD. RS. 25 LACS 4. ALKA DIAMOND INDUSTRIES LTD. RS. 15 LACS 5. KUMAON ENGINEERS CO. PVT. LTD. RS. 10 LACS 6. VANGUARD JEWELS LTD. RS. 15 LACS 7. CASPER ENTERPRISES PVT. LTD. (OSTWAL TRADING (INDIA)PVT. LTD. RS. 5 LACS 8. TRIANGULAR INFOCOM LTD. (LEXUS INFOTECH LTD. RS. 15 LACS 2.1 THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ABOVE ADDITION ON THE BASIS OF STATEMENT OF SH. PRA VEEN JAIN BY INCORRECTLY HOLDING THAT THERE WAS NO NEED TO PROVI DE OPPORTUNITY FOR CROSS EXAMINATION AND IGNORING THE FACT THAT SH . PRAVEEN JAIN HAS RETRACTED FROM HIS STATEMENT. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETURN OF INCOME DECLARING LOSS OF RS 8,12,510 ON 2 6.09.2009 WHICH WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE AO ISSUED NOTICE U/S 148 OF THE ACT DATED 09.01.2015 WHICH WAS DULY SERVED ON THE ASSESSEE AND THE ASSESSMENT WAS COMPLETED WHEREIN A N ADDITION OF RS. 1.10 CRORES WAS MADE U/S 68 OF THE IT ACT ON AC COUNT OF UNEXPLAINED SHARE CAPITAL. BEING AGGRIEVED, THE ASS ESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS SUST AINED THE ADDITION AND NOW THE ASSESSEE IS IN APPEAL BEFORE US. 3. IN GROUND NO. 1, THE ASSESSEE HAS CHALLENGED TH E LEGALITY OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S 147 OF TH E ACT. IN THIS REGARD, THE LD. AR DRAWN OUR REFERENCE TO THE REASONS RECOR DED BY THE ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 3 ASSESSING OFFICER BEFORE ISSUANCE OF NOTICE U/S 148 AND THE REASONS READS AS UNDER:- AS PER INFORMATION AVAILABLE ON RECORD, IT IS GATH ERED THAT DURING F.Y. 2008-09, THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR THE AY 2009-10 DECLARING TOTAL INCOME OF RS.8,12,510/- WHICH STANDS PROCESS U/S 143(1). ON VERIFICATION OF RECORD, IT WAS FOUND THAT THE AS SESSEE HAS TAKEN ACCOMMODATION ENTRIES OF RS.75,00,000/- IN TH E NATURE OF LOAN/ADVANCE/PURCHASE BILL FROM ALKA DIAMOND IND. L TD. OF RS.15,00,000/-, CASPER ENTERPRISES P. LTD (OSTWAL T RADING(I) P. LTD) OF RS.5,00,000/-, OLIVE OVERSEAS P LTD (REALGO LD TRADING CO. P.) OF RS.10,00,000/-, TRIANGULAR INFOCOM LTD. (LEX US INFOTECH LTD.) OF RS.30,00,000/- AND VANGUARD JEWELS LTD OF RS.15,00,000/- ALL THE CONCERNS INDULGED IN PROVIDI NG ACCOMMODATION ENTRIES IN LIEU OF CASH OBTAINED FROM THE BENEFICIARIES AND NOT DOING ANY GENUINE BUSINESS AC TIVITY AS DIVULGED DURING THE COURSE OF SEARCH AND SEIZURE PR OCEEDINGS IN THE CASE OF PRAVEEN JAIN GROUP, MUMBAI. THE ASSESSE COMPANY IS A BENEFICIARY WHO HAS TAKEN ACCOMMODATION ENTRY IN THE NATURE OF LOANS AND ADVANCES WHICH IS NOT GENUINE AS THE L ENDER WAS NOT CARRYING ON ANY GENUINE BUSINESS ACTIVITY AND WAS P ROVIDING ACCOMMODATION ENTRIES IN LIEU OF CASH OBTAINED FROM THE BENEFICIARIES. ON THE BASIS OF INFORMATION AVAILABLE ON RECORD, TH EREFORE THE ASSESSEE HAS FAILED FULLY AND TRULY ALL MATERIAL FA CTS NECESSARY FOR THIS ASSESSMENT. I HAVE REASON TO BELIEVE THAT INCO ME OF RS.75,00,000/- CHARGEABLE TO TAX HAS ESCAPED ASSESS MENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT 19 61. 4. THE LD. AR SUBMITTED THAT FROM THE REASONS SO R ECORDED, IT CAN BE NOTED THAT AO HAS REOPENED THE ASSESSMENT ON THE BA SIS OF INFORMATION AVAILABLE ON RECORD THAT IN SEARCH OF PRAVEEN JAIN GROUP, MUMBAI, IT IS ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 4 DIVULGED THAT ASSESSEE HAS TAKEN ACCOMMODATION ENTR IES OF RS. 75,00,000/- IN THE NATURE OF LOAN/ADVANCE/PURCHASE BILL FROM FIVE COMPANIES WHICH IS NOT GENUINE. IT WAS CLEAR FROM A BOVE THAT IN THE REASONS RECORDED, THE AO HAS NOT SPECIFIED FROM WHO M HE HAS RECEIVED THE INFORMATION, HOW SUCH INFORMATION RELATED TO TH E ASSESSEE AND WHETHER IN SEARCH OF PRAVEEN JAIN GROUP, ANY MATERI AL/ EVIDENCE WAS FOUND THAT ASSESSEE HAS TAKEN ALLEGED ACCOMMODATION ENTRIES. IT WAS FURTHER SUBMITTED THAT THE REASONS RECORDED IS NOT SPECIFIC AS TO WHETHER ASSESSEE HAS TAKEN LOAN OR ADVANCE OR MADE PURCHASES FROM THESE FIVE COMPANIES WHEREAS THE FACT IS THAT ASSES SEE HAS NEITHER TAKEN ANY LOAN OR ADVANCE OR MADE ANY PURCHASES FRO M THE ABOVE PARTIES. THE AO IN THE ASSESSMENT ORDER HAS ALSO NO T MADE ANY ADDITION ON ACCOUNT OF ALLEGED LOAN/ ADVANCES/PURCHASES RATH ER HE MADE ADDITION ON ACCOUNT OF THE SHARE CAPITAL. THIS SHOW S THAT AO HAS NOT EXAMINED THE INFORMATION ALLEGED TO BE ON RECORD TO VERIFY THE NATURE OF RECEIPT FROM THESE PARTIES. THIS APART IN THE REASO NS THERE IS NOTHING WHATSOEVER TO SHOW AS TO WHICH IS THE RECORD WHICH SHOWS THAT THERE WERE BOGUS LOAN/ADVANCE/PURCHASE TO THE EXTENT STAT ED THEREIN. NEITHER ANY PAPER OR ANY DOCUMENT OR STATEMENT OF ANY PERSO N HAS BEEN REFERRED IN THE REASONS TO HAVE A REASON TO BELIEF THAT LOAN/ADVANCE/PURCHASE TAKEN FROM FIVE COMPANIES IS BOGUS. HENCE THE REOPENING OF ASSESSMENT IS ILLEGAL & BAD IN LAW. 5. IN SUPPORT, RELIANCE WAS PLACED ON THE CO-ORDINA TE BENCH DECISION IN CASE OF M/S MERTA OIL MILLS COMPANY PVT. LTD. VS. ITO (ITA NO.516/JP/16 ORDER DT.11.05.2018). IN THAT CASE, THE AO HAS RECORDED THE REASONS STATING THAT ASSESSEE HAS OBTA INED ENTRIES OF ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 5 BOGUS PURCHASES FROM CERTAIN COMPANIES MANAGED BY P RAVEEN JAIN WHEREAS NO SUCH BOGUS PURCHASE WAS MADE RATHER THE SHARE CAPITAL WAS RECEIVED FROM THESE COMPANIES. THE JAIPUR BENCH OF THE TRIBUNAL ON THESE FACTS QUASHED THE REOPENING BY GIVING FOLL OWING FINDINGS: 7. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. WE HAVE CONSIDERED THE CASE LAWS RELIED UPON BY BOTH THE SI DES. WE HAVE ALSO GONE THROUGH THE REASONS RECORDED BY THE ASSES SING OFFICER FOR ISSUING THE NOTICE U/S 148 OF THE ACT ON 25/3/2 014. IT IS NOTICED THAT THE ASSESSING OFFICER RECEIVED INFORMA TION FROM DGIT(INV), MUMBAI. THE DETAILS OF THE ENTRY PROVIDE R COMPANY AND NATURE OF ENTRY AND AMOUNT WAS PROVIDED. HOWEVE R, WHILE RECORDING THE REASONS, THE ASSESSING OFFICER HAS WR ITTEN THAT THE ASSESSEE HAS OBTAINED ENTRIES OF BOGUS PURCHASES. F URTHER IN FINALLY RECORDED THE SATISFACTION TO ISSUE THE NOTI CE U/S 148 OF THE ACT, THE ASSESSING OFFICER HAS RECORDED THE REASONS , WHICH ARE REPRODUCED HEREUNDER: THE ACCOMMODATION ENTRIES OF BOGUS SALES PROVIDED BY THE ABOVE COMPANIES CONSTITUTE BOGUS PURCHASES IN THE H ANDS OF THE ASSESSEE. THE ASSESSEE HAS SUPPRESSED ITS PROFITS B Y TAKING ACCOMMODATION ENTRIES OF BOGUS PURCHASES. THEREFORE , I HAVE REASONS TO BELIEVE THAT MINIMUM INCOME OF RS.75,00, 000/- HAS REMAINED ESCAPED TO BE TAXED IN TERMS OF SECTION 14 7 R.W.S. 148 OF THE I.T. ACT FOR THE ASSESSMENT YEAR UNDER CONSI DERATION. THUS THE ASSESSING OFFICER HAS CATEGORICALLY RECORD ED IN THE REASONS THAT THE ASSESSEE HAS SUPPRESSED ITS PROFIT S BY TAKING ACCOMMODATION ENTRIES OF BOGUS PURCHASES. THE INTIM ATION FROM DGIT (INV), MUMBAI WAS ABOUT THE BOGUS INVESTMENT/S HARE APPLICATIONS. THUS, THE ASSESSING OFFICER HAS NOT A T ALL APPLIED HIS MIND WHILE RECORDING THE REASONS. THE FACTS ON RECO RD CLEARLY ESTABLISHES THAT THE ASSESSING OFFICER HAS NOT APPL IED HIS MIND SO AS TO COME TO A CONCLUSION THAT HE HAS REASON TO BE LIEVE THAT THE ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 6 INCOME HAS ESCAPED ASSESSMENT FOR THE YEAR UNDER CO NSIDERATION. THE REASONS RECORDED ARE VAGUE AND ARE NOT BASED ON ANY TANGIBLE MATERIAL AS WELL AS ON THE FACTS ACCEPTABL E IN THE EYES OF LAW. THE REASONS RECORDED ALSO SUGGEST THAT THE ASS ESSING OFFICER HAS MECHANICALLY ISSUED NOTICE U/S 148 OF THE ACT E VEN NOT BOTHERING REGARDING THE NATURE OF INFORMATION RECEI VED FROM THE DGIT (INV), NEW DELHI. SUCH VAGUENESS IN THE REASON S RECORDED MAKE REOPENING BAD IN LAW AND DESERVED TO BE QUASHE D. SUCH VIEW IS ALSO SUPPORTED BY THE VARIOUS DECISIONS OF THE HON'BLE HIGH COURTS AND THE TRIBUNALS AS STATED (SUPRA). TH EREFORE, WE QUASH THE REOPENING OF THE ASSESSMENT. 6. FURTHER RELIANCE WAS PLACED ON THE COORDINATE BE NCH DECISION IN CASE OF META PLAST ENGINEERING PVT. LTD. VS. ITO (ITA NO.5780/DEL/2014 ORDER DT.06.04.2018) . IN THAT CASE, THE REASONS RECORDED BY THE AO DO NOT SUGGEST WHETHER THE ASSES SEE HAS RECEIVED OR PROVIDED THE ACCOMMODATION ENTRIES IN AS MUCH AS THE REASONS READ THAT BOGUS ACCOMMODATION ENTRIES WERE PROVIDED/TAK EN, IT MEANS THERE IS NO APPLICATION OF MIND BY THE AO WHILE REC ORDING REASONS AND THUS THE REOPENING OF ASSESSMENT WAS HELD BAD IN LA W. 7. FURTHER RELIANCE WAS PLACED ON THE COORDINATE BE NCH DECISION IN CASE OF M/S BALAJI HEALTH CARE PVT. LTD. VS. THE ITO(E) (ITA NO.566 & 567/JP/2018 ORDER DATED 30.01.2019) WHEREIN IT WAS HELD THAT: MATERIAL AND INFORMATION ON THE BASIS OF WHICH REA SONS HAVE BEEN RECORDED THAT INCOME IN THE HANDS OF THE ASSES SEE HAS ESCAPED ASSESSMENT RELATES TO SEARCH AND SEIZURE OP ERATION IN CASE OF SURENDRA KUMAR JAIN AND VIRENDRA KUMAR JAIN AND THE REPORT OF THE DIRECTOR OF INCOME TAX (INV)-II, NEW DELHI. BASED ON ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 7 THE REPORT OF THE DIT, AO HAS FORMED NOT MERELY A P RIMA FACIE BELIEF BUT HAS REACHED A CONCLUSION THAT THE ASSESS EE HAS ROUTED BACK HIS UNDISCLOSED INCOME IN THE FORM OF SHARE CA PITAL. HOWEVER, FOR REACHING SUCH A DECISIVE FINDING, THER E IS NOTHING WHICH HAS BEEN STATED IN THE REASONS SO RECORDED. T HEREFORE, WITHOUT ESTABLISHING THE NEXUS, THE AO HAS NOT JUST FORMED A PRIMA FACIE VIEW BUT HAS CONCLUDED THAT THE AMOUNT INVESTED IS UNDISCLOSED INCOME WHICH HAS ESCAPED ASSESSMENT CAN NOT BE ACCEPTED. FURTHER, THERE IS NOTHING IN THE REASONS SO RECORDED THAT THE AO HAS GONE THROUGH THE STATEMENTS OF SURE NDRA KUMAR JAIN, VIRENDRA KUMAR JAIN RECORDED DURING THE COURS E OF SEARCH AND THE SEIZED MATERIAL TO SHOW PRIMA FACIE LINKAGE OF ASSESSEES UNDISCLOSED INCOME BEING ROUTED BACK IN THE FORM OF SHARE CAPITAL. THE FACT THAT THE ASSESSEE HAS FILED ITS R ETURN OF INCOME U/S 139(1) WAS VERY MUCH IN THE KNOWLEDGE OF THE AO AND THE LATTER COULD HAVE VERIFIED THE TRANSACTIONS WITH TH E REPORTED TRANSACTIONS IN THE FINANCIAL STATEMENTS AND COULD HAVE ASKED FOR MORE INFORMATION TO ESTABLISH THE NECESSARY NEXUS, HOWEVER, NOTHING OF THAT SORT HAS BEEN DONE BY THE AO AND HE HAS MERELY GONE BY THE REPORT OF DIT, INVESTIGATION WING. HENC E, THE ASSUMPTION OF JURISDICTION U/S 147 HAS NO LEGAL BAS IS AND RESULTANT REASSESSMENT PROCEEDINGS DESERVE TO BE SE T-ASIDE. 8. FURTHER RELIANCE WAS PLACED ON THE DECISION OF H ONBLE GUJARAT HIGH COURT IN CASE OF VARSHABEN SANATBHAI PATEL VS. ITO (2016) 129 DTR 261 (GUJ.) WHEREIN IT WAS HELD AS UNDER: ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 8 A PERUSAL OF THE REASONS RECORDED REVEALS THAT THE AO ON VERIFICATION OF THE DETAILS AVAILABLE ON RECORD HAS NOTICED THAT THERE WERE BOGUS PURCHASES. HOWEVER, FROM THE REASO NS THERE IS NOTHING WHATSOEVER TO SHOW AS TO WHICH IS THE RECOR D WHICH SHOWS THAT THERE WERE BOGUS PURCHASES TO THE EXTENT STATED THEREIN. NO DETAILS HAVE BEEN MENTIONED BY THE AO A S TO WHAT IS THE BASIS ON WHICH HE SAYS THE PURCHASES ARE BOGUS. AO FOR PURPOSE OF REOPENING ASSESSMENT PLACED RELIANCE UPO N MATERIAL FROM EXTERNAL SOURCE THAT DID NOT FORM PART OF RECO RD. IT WAS SETTLED LEGAL POSITION THAT SUBSTRATUM FOR FORMATIO N OF BELIEF THAT INCOME LIABLE TO TAX HAS ESCAPED ASSESSMENT HAD TO FORM PART OF REASONS RECORDED. APPARENTLY, SUBSTRATUM FOR FORMAT ION OF BELIEF, AS INDICATED IN ORDER REJECTING OBJECTIONS AS WELL AS AFFIDAVIT-IN- REPLY, WAS INFORMATION GIVEN BY DGIT (INV.), MUMBAI THAT HAD NO RELATION WITH REASONS RECORDED. AO ON BASIS OF MATE RIAL ON RECORD COULD NOT HAVE FORMED BELIEF THAT THERE WAS ANY ESC APEMENT OF INCOME CHARGEABLE TO TAX SO AS TO VALIDLY ASSUME JU RISDICTION U/S. 147. REASONS RECORDED FOR RE-OPENING OF ASSESSMENT COULD NOT BE SUPPLEMENTED IN AFFIDAVIT OR BY ORDER REJECTING OBJ ECTION. MATERIAL ON BASIS OF WHICH BELIEF THAT INCOME CHARGEABLE TO TAX ESCAPED ASSESSMENT HAS BEEN FORMED HAD TO FIND PLACE IN REA SONS ITSELF. FORMATION OF BELIEF THAT INCOME HAS ESCAPED ASSESSM ENT NOT BEING BASED UPON RECORD, SUBSTRATUM FOR REOPENING T HE ASSESSMENT COULD NOT BE SAID TO BE LAID IN REASONS RECORDED. THUS, BASIC REQUIREMENT FOR ASSUMPTION OF JURISDICT ION U/S 147 FOR REOPENING ASSESSMENT WAS NOT SATISFIED. IMPUGNED NO TICE U/S 148 COULD NOT BE SUSTAINED. ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 9 IN VIEW OF ABOVE, IT WAS SUBMITTED THAT THE REOPENI NG OF THE ASSESSMENT U/S 147 IS ILLEGAL AND BAD IN LAW AND TH E SAME BE QUASHED. 9. PER CONTRA, THE LD DR IS HEARD WHO HAS RELIED ON THE FINDINGS OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESS ING OFFICER WAS HAVING CREDIBLE INFORMATION TO HOLD THE BELIEF THE ASSESSEE HAS OBTAINED ACCOMMODATION ENTRIES TO THE TUNE OF RS. 75 LACS AN D THEREFORE, THERE IS A CLEAR NEXUS BETWEEN THE TANGIBLE MATERIAL AND FOR MATION OF BELIEF THAT THE INCOME OF THE ASSESSEE HAS ESCAPED TAXATION. IT WAS FURTHER SUBMITTED THAT THE RETURN OF INCOME WAS ORIGINALLY PROCESSED U/S 143(1) OF THE ACT, THERE IS THUS NO QUESTION OF CHANGE OF OPINION BY THE ASSESSING OFFICER. FURTHER, SHE RELIED ON THE FINDI NGS OF THE LD. CIT(A) WHICH READS AS UNDER:- 2.3.2. THE BELIEF OF THE AO IS CLEARLY THAT OF AN HONEST AND REASONABLE PERSON BASED UPON REASONABLE GROUNDS AS UPHELD IN THE DECISIONS OF HONBLE SUPREME COURT IN CASE OF S HEO NATH SINGH V. AAC [1971] 82 ITR 147 (SC) THAT THE WORDS REASONS TO BELIEVE SUGGEST THAT THE BELIEF MUST BE THAT OF AN HONEST AND REASONABLE PERSON BASED UPON REASONABLE GROUNDS, AN D THAT THE ITO MAY ACT ON DIRECT OR CIRCUMSTANTIAL EVIDENCE BU T NOT ON MERE SUSPICION, GOSSIP OR RUMOUR. THE ITO WOULD BE ACTIN G WITHOUT JURISDICTION IF THE REASON FOR HIS BELIEF THAT THE CONDITIONS ARE SATISFIED DOES NOT EXIST OR IS NOT MATERIAL OR RELE VANT TO THE BELIEF REQUIRED BY THE SECTION. 2.3.3. THERE MAY BE VARIATION IN THE AMOUNT FOR WHI CH REASSESSMENT WAS INITIATED AND THE AMOUNT WHICH IS FINALLY THE ADDITION MADE. IT IS POSSIBLE THAT STUBBLE DISTINCT ION OF CREDIT ENTRIES ARE NOT ADEQUATELY APPRECIATED BY THE AO. H OWEVER, PER ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 10 SE, SUCH VARIATION OR INADEQUATE APPRECIATION WOULD NOT VITIATE THE REASONS FOR RE-OPENING WHERE THE BELIEF OF THE AO IS COMPREHENSIBLE AS THAT OF AN HONEST AND REASONABLE PERSON BASED UPON REASONABLE GROUNDS AS SAID BY HONBLE SU PREME COURT IN CASE OF SHEO NATH SINGH V. AAC [1971] 82 I TR 147 (SC). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. IT IS A SETTLED LEGAL PROPOSI TION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE AS SESSING OFFICER. NO SUBSTITUTION OR ADDITION IS PERMISSIBLE. IT IS FOR THE ASSESSING OFFICER TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASONS RECO RDED BY HIM AND HE HAS TO SPEAK THROUGH THE REASONS. THE MATERIAL ON BASIS OF WHICH BELIEF HAS BEEN FORMED THAT INCOME CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT HAD TO FIND PLACE IN REASONS ITSELF AND THERE HAS TO BE A NEXUS BETWEEN THE MATERIAL AND FORMATION OF BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. IN THE INSTANT CASE, IN THE RE ASONS SO RECORDED, THE ASSESSING OFFICER STATED THAT ON VERIFICATION O F RECORD, IT IS FOUND THAT ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES IN TH E NATURE OF LOAN/ADVANCE/PURCHASE BILLS FROM FIVE ENTITIES. IT HAS BEEN STATED THEREIN THAT THE ASSESSEE COMPANY IS A BENEFICIARY WHO HAS TAKEN ACCOMMODATION ENTRY IN THE NATURE OF LOANS AND ADVA NCES WHICH IS NOT GENUINE AS THE LENDER WAS NOT CARRYING ON ANY GENUI NE BUSINESS ACTIVITY AND WAS PROVIDING ACCOMMODATION ENTRIES IN LIEU OF CASH OBTAINED FROM THE BENEFICIARIES. FIRSTLY, WHAT IS RELEVANT TO DE TERMINE IS THE MATERIAL THAT IS AVAILABLE ON RECORD ON THE BASIS OF WHICH T HE BELIEF HAS BEEN FORMED THAT INCOME HAS ESCAPED ASSESSMENT. WE FIND THAT THE SAME HAS NOT BEEN SPECIFIED BY THE ASSESSING OFFICER IN THE REASONS SO RECORDED, THEREFORE WHAT IS THE MATERIAL IN POSSESS ION OF THE ASSESSING ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 11 OFFICER BASIS WHICH THE BELIEF HAS BEEN FORMED IS N OT DISCERNABLE FROM THE REASONS SO RECORDED. THE LD DR HAS SUBMITTED T HAT THERE IS CREDIBLE INFORMATION WHICH HAS BEEN RECEIVED BY THE ASSESSIN G OFFICER, HOWEVER, AS WE HAVE STATED ABOVE, THE SAID MATERIAL HAS TO B E REFLECTED IN THE REASONS SO RECORDED AND THE REASONS CANNOT BE SUPPL EMENTED AS HELD BY THE HONBLE GUJARAT HIGH COURT IN CASE OF VARSHABEN SANATBHAI PATEL VS. ITO (SUPRA) WHEREIN UNDER SIMILAR FACT PATTERN, IT HAS BEEN HELD AS UNDER:- 15. ADVERTING TO THE FACTS OF THE PRESENT CASE, TH E RETURNS FILED BY THE ASSESSEE HAS BEEN PROCESSED UNDER SECTION 14 3(1) OF THE ACT. THE ASSESSING OFFICER IN THE REASONS RECORDED FOR THE PURPOSE OF REOPENING THE ASSESSMENT HAS PLACED RELI ANCE UPON THE RECORD OF THE CASE. AS NOTED HEREINABOVE, THERE IS NO ASSERTION AS REGARDS ON WHAT BASIS THE ASSESSING OF FICER HAS STATED THAT THE ASSESSEE HAD MADE CLAIM IN RESPECT OF BOGUS PURCHASES IN THE TRADING AND THE PROFIT AND LOSS AC COUNT AS EXPENDITURE. THE ASSESSING OFFICER HAS STATED THAT ON VERIFICATION OF THE DETAILS AVAILABLE ON RECORD, IT HAS BEEN NOT ICED THAT THE ASSESSEE HAS MADE BOGUS PURCHASES; HOWEVER, NO SPEC IFIC AVERMENTS ARE MADE AS REGARDS WHICH DETAILS AVAILAB LE ON RECORD REFLECTED SUCH BOGUS PURCHASES. IT IS EVIDENT THAT THE ASSESSING OFFICER FOR THE PURPOSE OF REOPENING THE ASSESSMENT HAS PLACED RELIANCE UPON THE MATERIAL FROM AN EXTERNAL SOURCE WHICH DOES NOT FORM PART OF THE RECORD. HOWEVER, THE SAID ASPE CT IS NOT REFLECTED IN THE REASONS RECORDED. ON BEHALF OF THE ASSESSING OFFICER, THE LEARNED COUNSEL IS NOT IN A POSITION T O POINT OUT ANY MATERIAL ON THE RECORD ON THE BASIS OF WHICH THE AS SESSING OFFICER ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 12 COULD HAVE FORMED SUCH BELIEF. WHAT IS NOW SOUGHT T O BE STATED BY WAY OF THE ORDER REJECTING THE OBJECTIONS AS WEL L AS THE AFFIDAVIT-IN-REPLY FILED IN RESPONSE TO THE AVERMEN TS MADE IN THE PETITIONS IS THAT THE FORMATION OF BELIEF IS BASED UPON THE INFORMATION WHICH IS RECEIVED FROM THE DGIT (INV.), MUMBAI. IT IS SETTLED LEGAL POSITION AS HELD BY A CATENA OF DECIS IONS THAT THE SUBSTRATUM FOR FORMATION OF BELIEF THAT INCOME LIAB LE TO TAX HAS ESCAPED ASSESSMENT HAS TO FORM PART OF THE REASONS RECORDED. IN THE PRESENT CASE, THE SUBSTRATUM FOR FORMATION OF B ELIEF, AS INDICATED IN THE ORDER REJECTING THE OBJECTIONS AS WELL AS THE AFFIDAVIT-IN-REPLY, IS THE INFORMATION GIVEN BY THE DGIT (INV.), MUMBAI, WHICH GOT NO RELATION WITH THE REASONS RECO RDED, WHICH ARE STATED TO BE BASED UPON THE MATERIAL AVAILABLE ON RECORD. UNDER THE CIRCUMSTANCES, THE ASSESSING OFFICER, ON THE BASIS OF THE MATERIAL ON RECORD, COULD NOT HAVE FORMED BELIE F THAT THERE WAS ANY ESCAPEMENT OF INCOME CHARGEABLE TO TAX SO A S TO VALIDLY ASSUME JURISDICTION UNDER SECTION 147 OF THE ACT. A S HELD BY THE SUPREME COURT IN A CATENA OF DECISIONS, THE REASONS RECORDED CANNOT BE SUPPLEMENTED IN THE AFFIDAVIT OR BY THE O RDER REJECTING THE OBJECTIONS. THE MATERIAL, ON THE BASIS OF WHICH , THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT HAS BEEN FORMED, HAS TO FIND PLACE IN THE REASONS ITSELF. 11. FURTHER, WE FIND THAT THE TRANSACTIONS WITH TH E FOUR ENTITIES WHICH HAVE BEEN LISTED IN THE REASONS SO RECORDED ARE THE TRANSACTIONS WHERE THESE FOUR ENTITIES HAVE SUBSCRIBED TO THE SHARE CA PITAL OF THE ASSESSEE COMPANY AND HAS THUS CONTRIBUTED THE MONEY TOWARDS THE SHARE CAPITAL, A FACT WHICH IS APPARENT FROM THE ASSESSME NT ORDER WHEREIN THE ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 13 ADDITION HAS BEEN MADE TOWARDS THE UNEXPLAINED SHAR E CAPITAL. HOWEVER, IN THE REASONS SO RECORDED BY THE ASSESSIN G OFFICER, IT HAS BEEN STATED THAT THE ASSESSEE HAS TAKEN ACCOMMODATI ON ENTRIES IN THE NATURE OF LOAN/ADVANCE/PURCHASE BILL. THE SAME THUS REFLECTS NON- APPLICATION OF MIND BY THE ASSESSING OFFICER AND LA CK OF EVEN BASIC VERIFICATION BEFORE RECORDING THE REASONS MORE SO W HERE THE RETURN OF INCOME IS ALREADY ON RECORD AND THUS A CASE OF BORR OWED SATISFACTION AND NOT THAT OF THE ASSESSING OFFICER. IN CASE OF PCIT-5, MUMBAI V/S M/S. SHODIMAN INVESTMENTS P LTD. (ITA NO. 1297 OF 2015 MUMBAI HC VIDE ORDER DATED 16.04.2018) , THE HONBLE BOMBAY HIGH COURT HAS HELD AS UNDER:- 13 IN THIS CASE, THE REASONS AS MADE AVAILABLE TO THE RESPONDENT ASSESSEE AS PRODUCED BEFORE THE TRIBUNAL MERELY INDICATES INFORMATION RECEIVED FROM THE DIT (INVEST IGATION) ABOUT A PARTICULAR ENTITY, ENTERING INTO SUSPICIOUS TRANS ACTIONS. HOWEVER, THAT MATERIAL IS NOT FURTHER LINKED BY ANY REASON T O COME TO THE CONCLUSION THAT THE RESPONDENT ASSESSEE HAS INDULGE D IN ANY ACTIVITY WHICH COULD GIVE RISE TO REASON TO BELIEVE ON THE PART OF THE ASSESSING OFFICER THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS FOR THIS REASON THAT THE RECORDED REASONS EVE N DOES NOT INDICATE THE AMOUNT WHICH ACCORDING TO THE ASSESSIN G OFFICER, HAS ESCAPED ASSESSMENT. THIS IS AN EVIDENCE OF A FISHIN G ENQUIRY AND NOT A REASONABLE BELIEF THAT INCOME CHARGEABLE TO T AX HAS ESCAPED ASSESSMENT. ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 14 14 FURTHER, THE REASONS CLEARLY SHOWS THAT THE ASSE SSING OFFICER HAS NOT APPLIED HIS MIND TO THE INFORMATION RECEIVE D BY HIM FROM THE DDIT (INV.). THE ASSESSING OFFICER HAS MERELY I SSUED A REOPENING NOTICE ON THE BASIS OF INTIMATION REGARDI NG REOPENING NOTICE FROM THE DDIT (INV.). THIS IS CLEARLY IN BRE ACH OF THE SETTLED POSITION IN LAW THAT REOPENING NOTICE HAS T O BE ISSUED BY THE ASSESSING OFFICER ON HIS OWN SATISFACTION AND N OT ON BORROWED SATISFACTION. 15 THEREFORE, IN THE ABOVE FACTS, THE VIEW TAKEN BY THE IMPUGNED ORDER OF THE TRIBUNAL CANNOT BE FOUND FAULT WITH. T HIS VIEW OF THE TRIBUNAL IS IN ACCORDANCE WITH THE SETTLED POSITION IN LAW. AS HELD BY THE BOMBAY HIGH COURT, THE MATERIAL IN P OSSESSION OF THE AO HAS TO BE FURTHER LINKED BY ANY REASON TO COME TO C ONCLUSION THAT THE ASSESSEE HAS INDULGED IN ANY ACTIVITY WHICH COULD G IVE RISE TO REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT. IN OTHER WORDS, UNLESS THE AO CARRIES OUT THE FURTHER EXAMINATION AFTER RECEIPT OF INITIAL INFORMATION, HOW CAN HE CONCLUDE THAT INCOME HAS ESCAPED ASSESSMENT. IT IS A FACT THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME AND THE AO SHOULD THEREFORE HAVE EXAMINED IT S RETURN OF INCOME AND CARRIED OUT INITIAL INVESTIGATION BEFORE COMING TO THE CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT. EVEN THE LD CIT(A) H AS STATED THAT STUBBLE DISTINCTION OF CREDIT ENTRIES ARE NOT ADEQU ATELY APPRECIATED BY THE AO. SIMILAR VIEW HAS BEEN TAKEN BY THE COORDIN ATE BENCHES IN CASE OF MERTA OIL MILLS COMPANY (SUPRA), META PLAST ENGI NEERING PVT. LTD (SUPRA) AND BALAJI HEALTH CARE PVT LTD (SUPRA). ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 15 12. FURTHER, FOR ASSUMPTION OF JURISDICTION, IN THE REASONS SO RECORDED BY THE ASSESSING OFFICER, HE HAS STATED THAT ASSESS EE HAS FAILED TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. APPARENTLY, THE ASSESSING OFFICER HAS DRAWN REFEREN CE TO THE PROVISO TO SECTION 147 OF THE ACT WHICH IN OUR MIND IS NOT APP LICABLE IN THE INSTANT CASE AS THE ORIGINAL RETURN SO FILED BY THE ASSESSE E WAS PROCESSED U/S 143(1) AND NOT UNDER SECTION 143(3) AND THUS, THE P ROVISO TO SECTION 147 AND THE CONDITION SO SPECIFIED THEREIN CANNOT B E INVOKED TO INVOKE ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT. 13. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRE TY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT BASIC REQUIREMENT FOR ASSUMPTION OF JURISDICTION U/S 147 IS NOT SATISFIED IN THE INSTANT CASE AND CONSEQUENT REASSESSMENT PROCEEDING S DESERVE TO BE SET-ASIDE. THE GROUNDS ON MERITS THUS BECOME ACADE MIC AND ARE DISMISSED AS INFRUCTIOUS. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/12/2019. FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:-06/12/2019. ITA NO. 1293/JP/2018 M/S SAFE INFRA PROJECTS PVT. LTD. VS. ITO 16 *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S SAFE INFRA PROJECTS PVT. LTD., JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-5(4), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 1293/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR